Selling startups is a difficult but rewarding path. People build businesses. Look at Adam Neumann for example. He was the CEO of WeWork. He’s in the business of building and selling business. He’s a millionaire or billionaire. Who knows unless we look at his tax returns.
Before selling a startup, understand this important principle. That money isn’t an issue. It’s results that matter. Venture capitalists, moguls and oligarchs agree, $1000 is too much to pay for a poor result. But $15 million is too little to pay for a good result.
What does this have to do with you? Everything. Work on your results. Your KPIs. Your revenue. Your net profit, gross profit and so on. You won;t worry about selling a startup. Instead, investors will look for you.
You must also leave the company thriving. Nobody wants a company that depends on one partner.
What Happens When the Founder Exits From company?
It’s a total disaster. A new management, let’s say 2 young men, rich kids, will take over the company. Both probably studied in Oxford university. Something related to liberal arts, business management, fields that have nothing to do with managing a real business. When the founder exits, these rich kids take over. They fire almost half of the employees and put in their hand picked people. Everyone has no experience. They take long to approve marketing campaigns. They’re bureaucratic. They put the CEO first and customers last. They underestimate the marketing department. In 90 days? They file for bankruptcy. That wasn’t nice. Was it?
If you’re a CEO, leave power to the right person. And if you’re a broker, a marketer, this article will broaden your ways on getting interested prospects.
5 Ways You Can Use To Sell Your StartUp
- Video: Make a video presentation of your company. Not just a video but a sales pitch. AKA VSLs. Script the big offer, show benefits, use persuasive techniques. Involve an expert copywriter to help you uncover the best arguments. Do this right, and you’ll convert more. You only need eyeballs. A video sent to 1000 VCs for example, converting at 1% means you’ll have 100 interested people.
- IPO: You could also go public and sell the majority of your shares to wall street. Becoming an IPO is a long term goal. Cryptocurrency startups usually have a roadmap of what they’ll do every year to reach the big goal. With a road map, it’s easier to reach your goal.
- Mergers and acquisition: There are 2 types of acquisitions. Horizontal and vertical. Horizontal means competitors could absorb you. There are 2 reasons for this: 1. It reduces competition, and establishes a monopoly, a win-win for both companies. Secondly, you supplement your weaknesses with the competitors strengths. You could also target fortune 500. They acquire businesses. Some investors are in the business of acquiring businesses. What matters is the offer you present to them.
- Retire with a royalty: If you’ve done a good job, you could simply appoint a new CEO, and quit your job. Retired founders will usually be on the board of advisors, working 4 hours a day. They attend meetings and approve stuff. You just have to negotiate a good percentage. Then let the CEO do the work for you.
- Strategic Partnerships: Partnerships, obtained through business development, are a nice way to request for acquisition. If you kept the relationship alive, partners know more about your industry than anyone else.
What Venture Capitalists Are Looking For
- A market size of at least $100 million
- A long term and proven niche, not a bubble like blockchain.
- A nice personality, flexible and easy to work with.
- Predictable sales using proven track record. Use year 1,2,3 to project the future.
- Existing parameters. Don’t value based on thinking, trends, or something you cannot see.
- Protection of business ideas through patents.
- High barrier to entry.
- Innovation, monopolies, uniqueness, wow factor.
- Unlimited scale and magnitude. Profits, Costs, Number of sales etc.
- Understanding of your market, customers, and business numbers.
In conclusion, if you want to sell your startup fast, find someone who already sold a startup. Pay for his time and let him guide you. Why? You ask? Humans rarely get things right for the first time. But with the right advisors, you won’t regret selling at a cheap price. You never want to be that story of a guy who sold a fortune 500 company at dirt cheap price.
You also need an exit strategy. Sign contracts and explain how things will run in absence of founders.
Wishing you more luck,
Your Second Master,
Direct Response Copywriting For Software